Linus Piecewise Is an Expected Utility Maximizer

question 39

Essay

Linus Piecewise is an expected utility maximizer. There are two events, H and T, which each have probability . Linus's preferences over lotteries in which his wealth is h if event H happens and t if event T happens are representable by the utility function . The function u takes the following form. For any x, u(x) = x if x < 100 and u(x) = 100 + if x is greater than or equal to 100. Draw a graph showing the indifference curves for Linus that pass through
a. the point (50, 0)
b. the point (50, 100)
c. the point (100, 100)
d. the point (150, 100)

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